G. Punitive Damages in Federal Maritime Cases

• Library: South Carolina Damages Supplement (SCBar) (2017 Ed.)

G. Punitive Damages in Federal Maritime Cases

The Court continued their refinement of punitive damage jurisprudence in its 2008 case, Exxon Shipping Co. v. Baker²¹¹In Exxon, the defendants were sued for environmental damage caused by the 1989 crash of their 900-foot supertanker the Valdez²¹²The captain of the Valdez, Joseph Hazelwood, was a long-time alcoholic who had recently relapsed.²¹³ Exxon officials were aware of the relapse, and the night before the Valdez left harbor Mr. Hazelwood drank five double vodkas.²¹⁴ Mr. Hazelwood's intoxication ultimately led to the grounding of his vessel on the Bligh Reef and the spilling of 11 billion gallons of oil into the Prince William Sound.²¹⁵At trial, a jury found Exxon liable for $5 billion in punitive damages, which was ultimately remitted by the Court of Appeals for the Ninth Circuit to $2.5 billion.²¹⁶ The Supreme Court reviewed this damages award to determine if it was permissible under Federal Maritime Law. In Exxon, the Court sought to answer three maritime law related issues: whether a ship owner could be held liable for punitive damages without acquiescing in the harm; whether punitive damages are barred implicitly by a lack of federal statutory law making a provision for them; and whether an award of $2.5 billion in punitive damages was acceptable.²¹⁷ Ultimately, the Court determined that the punitive damages where not preempted by a lack of federal law,²¹⁸ that federal maritime law did not support a ratio of punitive damages over 1:1,²¹⁹ and declared that it was unable to determine if maritime law supported holding the ship owners liable for punitive damages incurred by their employees.²²⁰ Though these holdings relate primarily to maritime law and thus have little direct relevance in state court law, the logic underlying its holding provides valuable insight into the Supreme Court's opinions regarding punitive damages.

It is important to note that the Exxon Court's decision was not based on its Due Process analysis as it had been in earlier decisions. Instead, the Court exercised its authority to make Federal common law. Thus, the logic behind the Court's holding sheds light on their current perceptions of the role of punitive damages.

The opinion makes clear that the Court's concern with punitive damages is not their quantity, but their consistency.²²¹ The Court expressly noted that although punitive damages "have been the target of audible criticism in recent decades," modern studies had disproved much of this criticism.²²² The Court also specifically noted:

A survey of the literature reveals that discretion to award punitive damages has not mass-produced runaway awards, and although some studies show the dollar amounts of punitive-damages awards growing over time, even in real terms, by most accounts the median ration of punitive damages to compensatory damages has remained less than 1:1.²²³

Thus, in setting the bounds for maritime punitive damages, the Court's primary objective was to balance the need for establishing a flexible system with the desire to create a system that yields predictable results. In reaching this analysis, the Court addressed each of the three most prominent methods of regulating punitive damages-limiting instructions, hard caps on damages, and ratio comparisons to compensatory damages.²²⁴ The Court began its analysis by examining the effectiveness of jury instructions in producing consistent awards.²²⁵ However, the Court found that "[i]nstructions can go just so far in promoting systemic consistency when awards are not tied to specifically proven items of damage."²²⁶ Moreover, the Court noted the similar rationale behind...